Distressed Debt

“He's managed about 70 odd billion dollars since 1988 in that field, by far the biggest. And of his total profits and losses, well over 90% are profits, less than 10% are losses.”

“Distressed at investing was such a frontier, say at least 25 years ago, even before the financial crisis. You didn't need to really care if it was a sock company or a steel company. You knew bankruptcy. The other guys didn't. That has been competed away and is…”

“We're doing more in MEZ, more in distressed, and a lot of the distressed people that we're working with, we're giving them trigger funds, so that we'll give you a certain amount of money today, and if there's a real proper distress cycle, we'll give you more, …”

“In the early days of the distressed debt business, there really was an openness to sharing information and thinking around valuations and opportunities in the market.”

“So we ended up buying 5000 loans within a four year time period and built a real nice business, just underwriting distressed debt.”

“The world of distressed debt still applies and is still really interesting, but there'd be whole new sections on that because the game has changed and for the worse, probably.”

“I think that we are not going to see a golden age of distress. Oh, these are great businesses that happen to have not the right cap structure. Those days are gone. The markets are too competitive. They're too multifaceted. There's too much dry powder. And in p…”

“There's not going to be a distress cycle. Sorry, there'll be some distress deals that are interesting, I'm sure, but you sort of had this period where, oh my gosh, things are going bad, let's raise a distress debt fund, and they still are trying, but just tell…”

“And if you look at distressed debt returns, they're uneven and they're not great over time.”

“And we think that most companies that end up in distress outside of recessions are bad businesses. And generally investing in bad businesses is not a good business for you.”

“Our view is at the beginning of a sell off, the worst thing you could do is buy the lowest dollar price, crappiest companies. If you were a company that traded, let's say you were an oil company that was trading at 75 in January of 2020 and was trading at 25 i…”

“Now I think people who work at central banks want to avoid recessions really at all costs. And that means they throw everything at it to avoid it. And when we're in it, we just saw unprecedented act after unprecedented act. So cycles are short. So you're not g…”

“We've had in the mid thirties percent of the book in the main fund during the peak of COVID in distressed, but we could have more than that and then add another 30 to 40% of the book in stressed.”

“Obviously with spreads blowing out the way they have opportunities in private credit, distressed, high yield are interesting. And there's enough stress that looks like it's been created in that market to make it attractive for liquidity providers. Wouldn't say…”

“Distressed debt doesn't do all that well. Everybody says, oh, the thing I want to do in the next crisis is buy a lot of distressed debt. Well, we have a simple rule at Verdad on both the equity side and the credit side, which don't buy things that go bankrupt.…”

“The large guys have a big advantage right now. They really get the look at a better deals, and they get to structure them themselves. You have to go pretty far down the curve, maybe sub-twenty, sub-fifteen million dollar kind of investments where they don't ca…”

“I think any one year can come out differently, but I think over time you're going to get high single, low double digit returns out of the control leader, and you're going to get 500 basis points worse out of the other guys over time, because what they'll get c…”

“Distressed debt is very different. You know, we generally prefer larger managers. They're managers who can afford the infrastructure, the legal expertise. They've been through multiple credit cycles.”

“Distressed investing, it can take, like, A week or a month to build a position because, you know, it's not an agency market. It's a principal market and the price discovery can be very tricky.”